Avishai Dekel of Yale University and the Weizmann Institute, along with Joseph Silk of U.C. Berkeley, re-examine the formation of dwarf, diffuse, metal-poor galaxies due to supernova-driven winds, considering recent data on dwarfs in the Local Group and Virgo Cluster. The observed decrease in surface brightness and metallicity with lower luminosity is better explained if these galaxies form within dominant halos, consistent with cold dark matter. The theory predicts that faint dwarfs have an increasing M/L ratio with lower luminosity, up to 10-100, and a slow decrease in velocity dispersion to 5-10 km/s. The condition for global gas loss from the first star formation burst is that the virial velocity is below ~100 km/s. In hierarchical galaxy formation scenarios, this leads to two galaxy classes: (a) diffuse dwarfs (dEs and dIs with retained gas) from typical density perturbations (1 sigma), and (b) normal, brighter galaxies (including compact dwarfs) from high-density peaks (2-3 sigma). This creates a statistical bias favoring bright galaxy formation in denser regions, enhancing their clustering. This may help reconcile the large-scale universe with the flat model from inflation. Diffuse dwarfs trace mass and should exist in voids, which lack bright galaxies. A significant amount of lost gas is expected in voids. The critical curves for cooling and gas loss define the loci of dwarfs and normal galaxies from 1 sigma and 3 sigma CDM perturbations. The theory aligns well with observations.Avishai Dekel of Yale University and the Weizmann Institute, along with Joseph Silk of U.C. Berkeley, re-examine the formation of dwarf, diffuse, metal-poor galaxies due to supernova-driven winds, considering recent data on dwarfs in the Local Group and Virgo Cluster. The observed decrease in surface brightness and metallicity with lower luminosity is better explained if these galaxies form within dominant halos, consistent with cold dark matter. The theory predicts that faint dwarfs have an increasing M/L ratio with lower luminosity, up to 10-100, and a slow decrease in velocity dispersion to 5-10 km/s. The condition for global gas loss from the first star formation burst is that the virial velocity is below ~100 km/s. In hierarchical galaxy formation scenarios, this leads to two galaxy classes: (a) diffuse dwarfs (dEs and dIs with retained gas) from typical density perturbations (1 sigma), and (b) normal, brighter galaxies (including compact dwarfs) from high-density peaks (2-3 sigma). This creates a statistical bias favoring bright galaxy formation in denser regions, enhancing their clustering. This may help reconcile the large-scale universe with the flat model from inflation. Diffuse dwarfs trace mass and should exist in voids, which lack bright galaxies. A significant amount of lost gas is expected in voids. The critical curves for cooling and gas loss define the loci of dwarfs and normal galaxies from 1 sigma and 3 sigma CDM perturbations. The theory aligns well with observations.